Earning Rs 25,000 monthly puts one in India's top 10%: Inequality report

Salaried employees who file income taxes are relatively better off, says study that recommends an urban employment scheme.

An Indian making Rs 3 lakh a year would be placed in the top 10 per cent of the country’s wage earners.

The data is part of The State of Inequality in India report prepared by the India arm of a global competitiveness initiative, the Institute for Competitiveness. Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister released it on Wednesday. The report recommended a scheme for the urban jobless and universal basic income as means to reduce inequality.

The nature of one's work may make a difference to income shows a closer look at the numbers in the inequality report. The share of salaried workers tends to go up as income rises while that of others, including the self-employed, decreases. Regular salaried workers had an average share of 18.43 per cent among those with an annual income of Rs 1 lakh or less, it showed.

The regular salaried worker’s share rises to 41.59 per cent for those with an annual income in excess of Rs 1 lakh. Self-employed workers accounted for 43.99 per cent of those earning more than Rs 1 lakh in annual income. They also accounted for 63.3 per cent on average of those earning less than Rs 1 lakh a year.

The report looked at data from the Periodic Labour Force Survey (PLFS) 2019-20 to conclude that earning Rs 25,000 per month would put a worker in the top 10 per cent of India’s wage earners.

“If an amount like this comes in the top 10 percentile, then the bottom-most condition cannot be imagined... the benefits of growth should be equitably distributed...,” it said.

'Business Standard' also looked at income tax data to see how salary income is distributed. The categories are broad in the income tax data. The bottom 50 per cent accounted for only 22 per cent of the total salary income among those filing non-zero salary returns.  This is based on salary income in returns for the assessment year 2018-19. The assessment year is one year after the financial year in which income is earned. So this would correspond to earnings for the financial year 2017-18 (FY18).  

It was similar for the 2012-13 assessment year which corresponds to FY12. The bottom 48 per cent of the population got 18 per cent of the total salary income. Exact comparisons to FY18 numbers are not possible because of the lack of granular data. There is some information, however, on broad income categories.

Those filing income tax returns are better off. The Rs 3 lakh figure which would put one in the top 10 per cent is for wages earned across all workers in India according to the State of Inequality report. But more than 70 per cent of salaried employees earn more than Rs 3.5 lakh per annum as of FY18.

A large proportion of this is concentrated within the bracket of Rs 3.5 lakhs to Rs 10 lakhs. They account for 56.9 per cent of the returns filed. Only 2.3 per cent earn Rs 25 lakhs or above.

Inequality in wages has been rising according to the report which examined data from various PLFS rounds.

“Across three survey rounds (2017-18, 2018- 19 and 2019-20), the share of the top 1% in the total income has only increased – from 6.14% in 2017-18 to 6.84% in 2018-19. In 2019-20, the top 1% registered a marginal fall,” it said.